Senior managers in insurance companies have special qualities. As people employed by insurance companies, they are governed by the Employment Contract Law of the People’s Republic of China (“Employment Contract Law”). As a specialgroup of senior managers,they are bound by the Company Law of the People’s Republic of China and insurance laws. I’d like to give some advice on compliance with legal requirements on appointment and withdrawal of the senior manager of an insurance company.

1. Senior managers play a dual role and are bound by the Company Law and the Employment Contract Law.

The senior manager employed by an insurance company has dual role. As an employee of the company under the Employment Contract Law, they are bound by the employment, remunerations and severance clauses in employment laws.    

Senior managers who play a particular managerial role should perform legal obligations under the Company Law, including the duty of loyalty, duty of care and non-compete obligation. The appointment of a senior manager under the Company Law should be subject to the articles of association of his/her company and other laws. A company can exempt any senior manager from his/her duties by following the legal process, whether it is his/her fault. Exemption of a senior manager from their duties under the Company Law does not entitle the company to discharge the employment with them under the Employment Contract Law. The employment can only be severed in one of the applicable events set out by the Employment Contract Law (for example, in the event that the employee is incompetent in his/her job or has seriously breached the company’s bylaws).

On the contrary, if the employment is discharged or terminated, the employee could not continue performing their duties and the company should promptly relieve them from their duties under the Company Law and complete the change registration or recordation formalities.

2. Notes on the appointment and employment of senior managers of insurance companies

Senior managers of insurance companies have general qualities of senior managers mentioned in the Company Law and should meet special requirements of China Insurance Regulatory Commission (“CIRC”). According to the Regulations on Qualifications of Directors, Supervisors and Senior Managers of Insurance Companies (revised in 2018), people who has the power to decide or an important effect on directors and supervisor of an insurance company and business, administrative and risk control activities of the company (including general manager, vice general manager, general manager assistant, secretary of the board of directors, compliance officer, chief actuary, finance head, auditor, etc.) should obtain qualifications approved by CIRC taking into account educational background, work experience, years of working, character and professional skills.

Aside from qualifications needed for particular positions, there are prohibitions on obtaining CIRC approved qualifications, under which people cannot obtain qualifications needed for particular positions in the event, for example, that their qualifications have been canceled or revoked by the financial regulatory authority for no more than 5 years, the period of time in which the financial regulatory authority prohibits them from entering the market has expired for no more than 5 years, or they are given a warning or administrative penalty by CIRC within 1 year before filing the application.    

As a copy of the signature page of the employment agreement is required for the application for the qualifications, it is necessary for an insurance company to check and predict the result of the application for the qualifications of a perspective senior manager (or director or supervisor) before executing an employment agreement, or adjust the effective date of the employment agreement in order to ensure that the person signing the employment agreement can work in the job thereunder. It is difficult and risky for an insurance company to sever the employment with a person who has signed the employment agreement but cannot obtain the qualifications needed for the job thereunder is difficult and risky.    

An insurance company should appoint the person who has obtained the CIRC approved qualifications to the corresponding job and perform the duty of reporting to CIRC within the legal period of time. Re-approval of the qualifications of a person who has been transferred to another post or in a concurrent post of senior management (at the same or lower level) in the same insurance company is not required unless otherwise required by CIRC. Directors or supervisor of an insurance company who have been transferred to another post or in a concurrent post of senior management (at the same or lower level) should be reported to CIRC for re-approval of the qualifications.   

For compliance with the Company Law, in the event that a person is appointed to a particular position, the insurance company should complete registration or recordation formalities with the corporate recordation authority as required by law.

3. Discharge of the employment/withdrawal of a senior manager of an insurance companies

Discharge or termination of the employment between an insurance company and any of its directors, supervisors and senior managers should comply with the Company Law, insurance laws and the Employment Contract Law. Discharge/withdrawal matters should be dealt with according to laws.

According to insurance laws especially the Circular on Measures to Administer Audits Relating to Directors and Senior Managers of Insurance Companies Issued by China Insurance Regulatory Commission (No.78, issued by CIRC in 2010), incumbent directors and senior managers should go through a number of audits, including mid-term, final and special audits. The final audit means an audit intended to assess the acts of performing job duties by a director or senior manager who is leaving the post for any reason, for example, because his/her term of office expires, he/she is transferred to another job or relieved or withdrawn from the post, resigns or retires. The final audit is normally done before the subject leaves. In case of a delayed audit with a cause, the audit report should be issued within 3 months after the subject leaves. It may take longer but in no event more than 6 months to complete the audit by an external auditor. The audit result should be submitted to the board of directors, the board of supervisors and CIRC. For compliance with insurance laws, the final audit should be legally performed and completed with an audit report (or in other words, the result of the final audit and information relating to the person leaving the post should be reported to CIRC within the legal period of time)

For compliance with the Labor Contract Law, if the employee leaves before the final audit, it is necessary to make arrangements for liabilities and losses found in the audit, especially in the event of a termination of the employment through consultation. The method, term and conditions of the deferred payment of compensations for a senior manager are also important matters. In the event of a discharge of the employment through consultation, the parties involved should reach an agreement on the deferred payment or stop the deferred payment of compensations.

For compliance with the Company Law, in the event that a person in a particular position leaves, the insurance company should complete change registration or recordation formalities with the administration of industry and commerce.